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Assessing the Impact of Customer Concentration on Initial Public Offering and Balance Sheet–Based Outcomes

Published on Nov 1, 2017in Journal of Marketing7.82
· DOI :10.1509/jm.16.0457
Alok R. Saboo6
Estimated H-index: 6
(J. Mack Robinson College of Business),
V. Kumar8
Estimated H-index: 8
(HUST: Huazhong University of Science and Technology),
Ankit Anand2
Estimated H-index: 2
(J. Mack Robinson College of Business)
Abstract
AbstractUsing the notion of customer concentration, the authors argue that firms should evenly spread their revenues across their customers, rather than focusing on a few major customer relationships. Prior literature suggests that major customers improve efficiency and provide access to resources, thereby producing positive performance outcomes. However, building on industrial organizational literature and modern portfolio theory, the authors argue that concentration of revenues reduces the supplier firm’s bargaining power relative to its customers and hurts the ability of the supplier firm to appropriate value, which, in turn, hurts profits. Using a sample of 1,023 initial public offerings (IPOs) and robust econometric methods, they find that customer concentration reduces investor uncertainty and positively impacts IPO outcomes, but significantly hurts balance sheet–based outcomes (e.g., profitability). The results suggest that a 10% increase in customer concentration reduces profitability by 3.35% (or...
  • References (82)
  • Citations (7)
References82
Newest
#1Alok R. Saboo (J. Mack Robinson College of Business)H-Index: 6
#2Amalesh Sharma (A&M: Texas A&M University)H-Index: 3
Last.V. Kumar (J. Mack Robinson College of Business)H-Index: 57
view all 4 authors...
#1Elkin Olaguer Pérez Sánchez (Grupo México)H-Index: 3
#2Iván Darío Toro Jaramillo (UPB: Pontifical Bolivarian University)H-Index: 2
Last.Blanca Yenny Hernandez Sánchez (Grupo México)H-Index: 1
view all 3 authors...
#1Alok R. Saboo (GSU: Georgia State University)H-Index: 1
#2A K Chakravarty (UGA: University of Georgia)H-Index: 8
Last.Rajdeep Grewal (UNC: University of North Carolina at Chapel Hill)H-Index: 33
view all 3 authors...
#1Hui Feng (Iowa State University)H-Index: 5
#2Neil A. Morgan (IU: Indiana University Bloomington)H-Index: 38
Last.Lopo L. Rego (IU: Indiana University Bloomington)H-Index: 12
view all 3 authors...
#1Rui Wang (PKU: Peking University)H-Index: 6
#2Alok R. Saboo (J. Mack Robinson College of Business)H-Index: 6
Last.Rajdeep Grewal (UNC: University of North Carolina at Chapel Hill)H-Index: 33
view all 3 authors...
#1Brian D. Cadman (UofU: University of Utah)H-Index: 11
#2Jayanthi Sunder (UA: University of Arizona)H-Index: 9
Cited By7
Newest
#1Xuan Peng (HAU: Huazhong Agricultural University)H-Index: 1
#2Xiongyuan WangH-Index: 1
Last.Kam C. Chan (Western Kentucky University)H-Index: 30
view all 3 authors...
#1Amalesh Sharma (A&M: Texas A&M University)H-Index: 3
#2V. Kumar (J. Mack Robinson College of Business)H-Index: 57
Last.Anirban Adhikary (Indian Institute of Management Udaipur)H-Index: 1
view all 5 authors...
#1David M. Gligor (University of Mississippi)H-Index: 15
#2Siddik Bozkurt (University of Mississippi)H-Index: 2
Last.Ayman F. Omar (AU: American University)H-Index: 9
view all 4 authors...
#1Andrew T. Crecelius (UAB: University of Alabama at Birmingham)H-Index: 2
#2Justin M. Lawrence (MSU: Michigan State University)H-Index: 2
Last.Lisa K. Scheer (MU: University of Missouri)H-Index: 19
view all 5 authors...
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